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The White House Can’t Have It Both Ways on Iran

By JONATHAN SCHANZER

December 19, 2013

Defying a White House veto threat, a bipartisan group of senators rolled out a new Iran sanctions bill Thursday that aims to give America more leverage at the negotiating table in the ongoing nuclear talks with Iran. And the bill couldn’t have come soon enough. Washington has been increasingly at odds with itself over its Iran policy in recent weeks.

Last week, for example, the Treasury Department announced a new tranche of targeted financial sanctions against entities providing support to Iran’s nuclear program. David Cohen, Treasury’s undersecretary for terrorism and financial intelligence, dubbed the move a “stark reminder to businesses, banks, and brokers everywhere that we will continue relentlessly to enforce our sanctions, even as we explore the possibility of a long-term, comprehensive resolution of our concerns with Iran’s nuclear program.”

While the measures were in lockstep with bipartisan U.S. policies dating back the George W. Bush administration, the timing of the statement was decidedly awkward. The designations dropped just as Adam Szubin, the head of Treasury’s Office of Foreign Assets Control (OFAC), was negotiating with his Iranian counterparts in Vienna the terms of the Joint Plan of Action (JPA), a framework agreement signed last month between Iran and six world powers designed to dissuade Iran from building a nuclear bomb. The Iranians, responding to the designations, promptly left Vienna in protest, calling the Treasury actions “unconstructive.”

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Fast forward a few days, and the Iranians have returned to the table. Indeed, their departure was a rather poorly played bluff. As it turns out, they are rather desperate for the sanctions relief the JPA is slated to provide. The White House says that the relief will total no more than $7 billion. But Tehran’s eagerness to return to talks be a clear indication of just how much more those sanctions could be worth (upwards of $20 billion, according to my colleague Mark Dubowitz), not to mention the psychological impact of such a move for potential investors eyeing opportunities in Iran.

The exact value of the proposed sanctions relief was just one of the areas of vociferous debate on Capitol Hill last week. Secretary of State John Kerry, along with chief American negotiator Wendy Sherman and Treasury’s Cohen, was grilled by legislators who are deeply ambivalent over the terms of the JPA, the exact value of the sanctions relief, and the rationale behind the administration’s refusal to allow Congress to tee up more sanctions, even if they are not immediately implemented.

Last week’s Treasury actions punctuate the impossible position the White House has embraced. On the one hand, the administration wishes to convey to the Iranians that it is creating favorable conditions for a mutually beneficial deal. On the other, it seeks to convey to members of Congress and their constituents (polls show that Americans roundly distrust Iran’s intentions) that the administration will remain tough and enforce the existing sanctions.

But, as the Daily Beast’s Eli Lake and Josh Rogin recently reported, the administration’s designations have trailed off significantly in recent months, even though the JPA explicitly allows for more designations under the existing regime. Indeed, before the election of Iran’s President Hassan Rouhani in June, no less than 183 entities were designated. Following the election of Rouhani, widely touted as a moderate, there have been only 29 such designations.

In other words, it’s highly unlikely that the National Security Council, State, Treasury and Justice Departments just happened to approve these most recent designations in the wake of the Geneva deal. In all probability, they got the coveted interagency thumbs up weeks or months ago. But the administration likely held off on designating new entities for fear that rapprochement with Iran was still new and fragile.

With an angry Congress openly questioning the administration’s will to hold the line on sanctions, these latest designations were designed to prove a point: that the White House can be serious about enforcing sanctions while also negotiating their end in a final nuclear deal.

If that sounds like a fine line to walk, that’s because it is. Actively punishing Iran for its mendacity while trying to selectively reduce other sanctions (in this case, automotive, petrochemicals and precious metals) for the sake of diplomacy projects two competing messages.

It should come as no surprise that this dual approach has inspired the confidence of neither Iran nor Congress. Indeed, the only actors out there who are heartened by Washington’s conflicted policies are the companies eyeing investments in Iran. They see confusion, and therefore ambiguity. And that’s a whole lot better than the investment environment of just a few months ago, when Iran appeared to be completely off limits.

The new Senate bill will the provide Washington with an insurance policy against Iranian deception. If it passes, it would legislate the imposition of new sanctions the moment Iran violates the terms of the interim deal.

That would immediately re-inject fear into the equation and deter firms looking to cash in on the potential growth opportunities in Iran. More importantly, it would untangle Washington’s impossibly hedged Iran policy. And though the White House will insist otherwise, it promises to rearm the administration with the clear leverage that ultimately brought Iran to the table in the first place.

Jonathan Schanzer, a former terrorism finance analyst at the U.S. Department of the Treasury, is vice president for research at Foundation for Defense of Democracies.